CREDIT REPORTS AND CREDIT BUREAU EXPLAINED
What do the credit bureaus include on the credit reports?
COURT RECORDS Bankruptcies, judgments, divorces, liens, satisfied judgments or liens are all considered court records and show up on your credit report as negative listings. Along with any payment histories on credit cards, mortgages, and other debt.
How long before the negative information will be taken off my credit report and credit bureau?
Even though your creditor or the credit bureau can remove negative items whenever they choose, here are the rules set forth by the Fair Credit Reporting Act (FCRA):
1. Most negative items must be taken off in no more than seven years.
2. Bankruptcies can be reported in up to ten years.
3. Inquiries may remain on the credit report for up to two years
Who is allowed to see my credit report and credit bureau?
Not only do lenders look at your credit report, but many others use it as a yardstick to determine your financial history. Here are examples:
1. Lenders
2. Auto Insurance Companies
3. Life Insurance Companies
4. Employers
5. Renters
What are R1 and R9?
1. "R" refers to a revolving account
2. "I" refers to an installment account
3. "M" refers to a mortgage account.
These ratings are supplied by the creditor and describe you as a borrower. A rating of "1" is good, and a rating of "0" means that they don't have enough information or history to give you a rating. Any other rating ("2" through "9" ) is considered negative.
Usually creditors don't look at these ratings when you apply for a loan. They normally look for late payments, charge offs, or collections.
Check your credit report/ credit bureau and remove any errors.
Keeping an eye on your credit is very important to ensure accuracy. Some companies neglect to properly report changes in account status. It's up to you to make sure your credit history is accurate.
Why should I check my credit report and credit bureau?
It's one thing to have bad credit, but it is another to have errors on your credit report through no fault of your own. The result, however, is the same - unless you correct it. Did you know that you pay a higher interest rate on you car and mortgage with questionable credit?
What exactly is a Credit Report?
A credit report is a factual record of your credit payment history. It's provided to companies and individuals by credit bureaus for purposes permitted by law, usually to grant you credit. The main purpose of a credit report is to help a credit grantor decide whether to grant you credit based upon your credit payment history. A credit report is a report generated from your credit file (a database maintained by a credit bureau containing your credit history).
Why should I periodically review my credit report and credit bureau?
Identity Theft/Fraud: With identity theft on the rise in the United States, the number one reason to review your credit report at least once a year is to detect and stop fraud ñ before you need your credit report and applying for new credit.
What Kind of Information Appears on the Credit Report and credit bureau?
Identifying Information
Items such as your name, any aliases, current and previous addresses, social security number, possibly marital status.
Merchant Trade Lines or Credit Lines
These include all regular installment or revolving credit lines such as department store cards, auto loans, mortgages, and credit cards. If you have any history of late payment or if the credit account was included in a bankruptcy, charged off, or put into repossession, the listing will be considered negative or derogatory by all credit grantors.
NOTE: Not all credit accounts may be listed on your credit report since not every credit grantor reports to the same credit bureaus. In addition, not all credit grantors report every credit account to the credit bureaus. For a thorough review of your credit file, you should look at information from all three major credit bureaus.
Collection Accounts
When any credit account is referred to a collection agency or the collections department of a credit grantor because of delinquency, non-payment, or other reason, it shows on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts. Any account that shows as a collection account (whether paid or not) is considered very negative by credit grantors.
Court Records
Court records include bankruptcies, judgments, satisfied judgments, liens, satisfied liens, and divorce. Most court records, including satisfied liens and/or judgments, are considered very negative by credit grantors.
Inquiries
Each time you apply for credit and a potential credit grantor looks at your credit file, an "inquiry" appears on at least one of your credit bureau files. Inquiries can also appear when an existing credit grantor reviews your credit periodically (to increase your credit line, etc.), or when you review your own credit report. These requests for your credit report are noted as part of your credit history file and can remain for 24 months.
However, a credit grantor may find what it considers "excessive inquiries," and reject your credit application. There are no guidelines or laws that govern the number of inquiries that constitute "excessive." It is each credit grantor's decision. Credit grantors usually reject applications for this reason when they see several inquiries but no new credit. They would rather be safe than sorry. Some companies make unauthorized inquiries to check your credit. Protect yourself from unauthorized inquiries by not giving out your personal information to a merchant (including addresses and drivers licenses) until you are ready to actually apply for credit.
What's Not Included
Your credit report will not include information about your race, salary history, religion, checking or savings accounts, stocks and bonds, medical history, personal assets, criminal record or personal background and lifestyle.
How Long Does Negative (Derogatory) Information Appear on my Credit Report and credit bureau?
The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file after seven years. Exceptions include bankruptcy, which can be reported for up to ten years. The credit grantor or credit bureau has the right to remove negative credit information whenever they please. Inquiries usually remain in your credit file for 24 months
How do they determine I have "Bad Credit?
Many people find out the hard way that as little as one late payment can bring credit denials at every turn. It is a myth that lots of good credit can outweigh a little bit of negative credit. Any negative credit at all can be a major credit obstacle for most people.
Who Can Look at My Credit Report and credit bureau?
Not just used to grant credit anymore, your credit file is used more and more as a measure of your character. Yes, prospective credit grantors will still review at least one of your credit reports before granting you credit. But, it is increasingly common for insurance companies to review your credit before extending auto or health insurance. And many employers now check your credit before they consider you for a position. If you rent, you have probably already been through a credit check to determine your worthiness as a renter. Basically, anyone who can prove a valid business purpose (and has your permission) can view your credit file. The Fair Credit Reporting Act has specific details.
Credit Report
Collection of an individual's current and past debt and its maintenance history: timely or late payments. You can obtain your credit report from any of several credit bureau agencies in the U.S.
Why does an account that has been paid still show with a balance on a credit report and credit bureau?
Most credit grantors report to repositories on a monthly or bi-monthly basis. Time requirements of creditors to report their data to the three major repositories widely varies. Time requirements that credit repositories have to add to a consumers credit report with new credit data also varies. The human factor between creditor and credit repositories may sometimes take weeks or several months to update their data. (Example: on an average a credit report reports balances approximately 30-60 days behind.)
Are there any laws that regulate credit repositories?
The Fair Credit Reporting Act is a federal law that regulates the credit reporting industry. It states that consumers have the right to know the contents of their credit file, the right to challenge the accuracy of information and have it re-verified, updated or removed. It also limits the time negative information can be kept on a credit report and insures that only persons with permissible purpose can access a consumer's credit file.
Credit basics
A good credit history is a very important aspect of financial health. It enables you to quickly get the credit you need at the best possible interest rates. Obtaining a good interest rate can save you a lot of money when shopping for a car, home, small business or other major purchase. Having good credit also gives you greater options in choosing a loan, especially on the Internet where lenders compete for the business of credit consumers. A good credit history can even help you get a job. Employers have learned that people who meet their financial obligations are more likely to be responsible and dependable employees. Simply put, good credit can make much of your personal and professional life easier.
When you obtain credit or a loan, the lender continually reports your repayment history, usually to all three of the nation's major credit bureaus (one of which is Experian). This repayment history forms the core of your credit report, and is what lenders analyze when deciding whether or not to extend you new credit. Credit bureaus only store your repayment history - they take no part in granting credit. That's up to the lenders.
The most important rule for maintaining good credit is to pay your bills on time! Your success at establishing good credit depends on making smart decisions about the type and amount of credit you use, as well as managing your debt so it doesn't get out of hand. It is not only important to pay on time, it is also wise to be sure you can afford to make the payments to pay off the debt. In the case of a credit card, it is smart to go easy with your purchases so you can keep the total amount owed within a reasonable range, even if your limit is much higher. Keeping a lid on spending helps prevent your debt from accruing to an amount you find difficult to manage or cause you to pay more interest than is necessary.
A general rule of thumb is to spend no more than a third of your income on all debt, including mortgages, credit cards and consumer loans. Try to use credit cards only for purchases that have long-term value, such as furniture, medical care, or emergency repairs. Many people find themselves overextended when they use credit cards for treats like dining out or entertainment. Poorly managed credit can take you deeply into debt and can lead to missed payments and a damaged credit rating.
If you use credit responsibly, you will have the added flexibility and security of credit at your disposal. You will be able to improve your lifestyle through purchases that are usually only possible with credit (like buying a home), utilize services that are sometimes only available if you have a credit card (like renting a car), and have the peace of mind to cover unexpected emergencies.
If you abuse your credit, you may have to pay much more for credit in the future, or you may be unable to purchase the goods and services you want and need.
What information is included in my credit report and credit bureau?
Your personal credit report contains:
Your name, current and previous addresses, phone number, Social Security number, date of birth and current and previous employers. Your spouse's name may appear on your version of the credit report, but it will not appear on the version that is provided to others. This information comes from your credit applications, so its accuracy depends on your filling out the forms clearly, completely and consistently each time you apply for credit.
Specific information about each account such as the date opened, credit limit or loan amount, balance, monthly payment and payment pattern during the past several years. This information comes from companies that do business with you.
Federal district bankruptcy records and state and county court records of tax liens and monetary judgments. This information comes from public records.
The names of those who have obtained a copy of your credit report. (On your copy of your credit report, addresses are included.) This information comes from the credit reporting agency.
Statements of dispute, which allow both consumers and creditors to report the factual history of an account. Statements of dispute can only be added after a consumer officially disputes the status of an account, the account has been reinvestigated, and the consumer and creditor cannot agree about the account status. Both the consumer's and creditor's statements of the account status will appear on the credit report.
Your credit report does not contain - and the credit bureaus do not collect - data about race, religious preference, personal lifestyle, political preference, medical history, friends, criminal record or any other information unrelated to credit.
How often should I check my credit report and credit bureau?
Your credit report plays a major role when you apply for any type of credit or loan, such as a credit card, auto loan, mortgage, employment screening, utilities deposits and insurance. It is a good idea to know what is on your credit report before applying for credit or a loan. If you know that you have information that may raise your level of risk in the eyes of lenders, then it is a good idea to try and clean the information up prior to applying for the loan. Creditors and lenders use your credit report to determine if you are a credit risk. It is a good idea to keep your credit report clean by paying all of your debt obligations on time.
